Summer is peak season for climate-related disasters, and an alarming percentage of homeowners may be underinsured to weather a natural disaster. Sixty-four percent of homes are underinsured by an average of 27%, according to the Residential Cost Handbook, published by Marshall & Swift/Boeckh, a consulting firm.
Reconstruction costs have risen by 5.6% to 7.6% in some areas over the last year, according to a separate study earlier this year, CoreLogic’s 2019 Insurance Coverage Adequacy Report. The study found that in Florida, for example, reconstruction costs have risen an estimated 5.6% from 2016 to 2018. As such, if 5% of homes with very high to extreme storm surge risk were destroyed, the reconstruction cost undervaluation would be about $205 million if coverage hasn’t been kept current, the study found. In California, if just 1% of homes at very high to extreme risk of wildfires are destroyed, the undervaluation would equate to about $25 million if homeowner insurance coverage isn’t current; in Houston, if flooding caused 5.4% damage to homes at very high to extreme risk, a 7.6% undervaluation would equate to $49 million if coverage isn’t current, the study says.
Homeowners should make it a point to routinely check their insurance to see what their coverage is in case of a flood, tornado, earthquake, or natural disaster, Amy Bonitatibus, chief marketing, and communications officer at Home Lending at JPMorgan Chase, told RealTrends.
Besides being properly insured, Bonitatibus also recommends taking steps to make sure homeowners are prepared if a natural disaster strikes. For example, collect paperwork. If a disaster strikes, homeowners will need lots of documents, such as birth certificates, car registrations, insurance policies, health insurance cards, and the title to their home. She encourages homeowners to compile physical and virtual copies of the paperwork.
Source: “Residential Cost Handbook,” CoreLogic (2019) and “Homeowners May Be Underinsured for Weather-Related Disasters,” RealTrends (June 27, 2019)
